ING RE: German office market a good bet

Property investors seeking opportunities in Germany should look in particular at the office market in the west of the country. A combination of slightly higher initial yields than the European average, favourable economic prospects and healthy take-up rates makes the region an attractive proposition, according to Bert Kragtwijk, senior managing director of ING Real Estate Finance.

The cities of Hamburg, Dusseldorf, Munich and Stuttgart all offer good investment opportunities, Kragtwijk told a mainly Dutch audience at the Provada property fair in Amsterdam. This is partly due to the fact that the area has long been ignored by international investors, he said. Moreover, vacancy rates - currently averaging 12% in the region - are falling, although the picture varies per city. Frankfurt currently has some of the highest vacancy rates, followed by Berlin and Cologne, while Stuttgart has the lowest.

In contrast to the office market, the German retail market has been 'discovered' by foreign investors, Kragtwijk said. Initial yields in this segment are lower than the EU average and in some cases, such as in Munich, are among the lowest in Europe. Yields in Frankfurt, Cologne, Berlin and Hamburg are even 0.5% above those in Amsterdam. Prospects in this segment remain good, Kragtwijk continued. Despite the hike in the German VAT rate earlier this year to 19%, the forecast decline in consumer spending has been offset by rising wages as the job market picks up.

Retail remains the most popular investment category in Germany, accounting for 37% of the total EUR 27 bn in transactions last year, followed by offices (28%). The Germans are the biggest investors at 38% of the total, followed by the Americans (34%).